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Subadditivity Re–Examined: the Case for Value-at-Risk

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  • Casper G. de Vries
  • Gennady Samorodnitsky
  • Bjørn N. Jorgensen
  • Sarma Mandira
  • Jon Danielsson

Abstract

This paper explores the potential for violations of VaR subadditivity both theoretically and by simulations, and finds that for most practical applications VaR is subadditive. Hence, there is no reason to choose a more complicated risk measure than VaR, solely for reasons of coherence.

Suggested Citation

  • Casper G. de Vries & Gennady Samorodnitsky & Bjørn N. Jorgensen & Sarma Mandira & Jon Danielsson, 2005. "Subadditivity Re–Examined: the Case for Value-at-Risk," FMG Discussion Papers dp549, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp549
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    References listed on IDEAS

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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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